If college freshmen think coming up with the cash to pay for tuition in the first year is hard, they're in for a surprise come senior year. Tuition inflation, a factor many families do not budget for when saving for college, can make tuition prices jump as much as 13 percent without warning from one year to the next.
To help parents plan for the rising costs of higher
education, schools across the country are adopting levelized-tuition
programs, also called fixed-rate tuition plans, tuition locks or
tuition-guarantee programs, that guarantee that the price you pay
for freshman year will be the same amount you fork over every year
While paying one price for all four years may sound
like a sweet deal, critics warn students to read the fine print
and ask the right questions before signing on the dotted line.
And stand warned that the tuition rate during freshman
year will likely be quite a bit steeper than the going rate. Here's
the lowdown on how levelized-tuition programs work and how to decide
if they're right for you.
The fixed-rate difference
According to Finaid.org, students can expect to pay an average of
8 percent in tuition inflation every year. Over four years, that
means those attending public schools (where the current average
tuition price nationwide is $5,491) can expect tuition for their
senior years to be roughly $1,425 more than what they'd paid in
their freshman years. Those attending private schools (where the
average tuition price is $21,235) can expect their tuition bills
to be a whopping $26,751 by senior year.
While it might be easy for families to plan for a
set tuition increase each year, the actual rate of tuition inflation
can change dramatically from year to year. This leaves families
without the ability to financially plan for the college road ahead.
"We don't set inflation rates until July, which is
a month before classes start. That's a bad time to tell parents
'Whoops, your tuition has just gone up $40 or $50 a credit hour,'"
says Diane Fleming, associate director for scholarships and financial
aid for Central Michigan University in Mount Pleasant, Mich. "With
our tuition-guarantee program, parents know what rate they'll be
getting for the next four or five years."
While most institutions give students and parents
more than a month to plan for significant increases, many public
schools are dependent on funding from the state and oftentimes can't
finalize their tuition prices until after state budgeting decisions
have been made in the spring. That gives students and parents about
three to four months to come up with the cash to cover a steep tuition
One solution? A one-price-fits-all plan. Most levelized-tuition
programs, including the one at Central Michigan University, operate
on an averaging system. While freshmen pay a significantly higher
level of tuition to take inflation into account, by senior year
they're likely paying less than other students at the school. At
CMU, for example, tuition rates are jacked up 19.9 percent in freshman
year, but over a four-year period the assumed inflation rate is